Generic Drugs’ 10-Year Savings To U.S. Health System Top $1 Tril. For First Time, GPhA Finds

Generic Pharmaceutical Association, with research from IMS Health, says the savings to the U.S. health care system from using generic drugs were $1.07 trillion over the past 10 years, a figure the group believes should be taken into consideration when looking for solutions to the general fiscal crisis facing the U.S. The association is going to focus on improving generic utilization on state and local level.

Use of generic drugs has saved the U.S. health care system over $1 trillion in the past 10 years, the first time such a figure has been reached over a 10-year window, according to data in a report released by the Generic Pharmaceutical Association.

Prepared by IMS Health Inc., GPhA’s report says that from 2002 to 2011, generics saved $1.07 trillion in the U.S., including $192.8 billion in 2011 alone. This is GPhA’s fourth annual report on generic drug savings; the 10-year savings figure from last year’s report was $931 billion.

At an Aug. 2 press conference, GPhA President and CEO Ralph Neas made a connection between the $1 trillion figure, the additional savings that can be expected once a pathway to approve biosimilars is established at FDA, and the fiscal crisis the U.S. is facing. He maintained that encouraging generic drug use is “the lowest-hanging fruit” that will help governments from the federal level down to the local level address the looming fiscal crisis, and he encouraged more movement in getting biosimilars to the market.

Neas said GPhA is going to focus its efforts on improving generic utilization in government programs at the state and local level. “This is money that can be used by the government because of more efficiency through generics, and if we focus on the ground up, I think we are going to have a much better chance than here in Washington over the next year and succeeding years.”

GPhA also called on FDA to continue its work on getting biosimilars to the market, which will help bring even more savings (and potential cost offsets) to the U.S. health care system. The report noted that the biologics market reached $120 billion in 2011 and is projected to grow to $200 billion in 2015. The report also cited Congressional Budget Office figures that estimate biosimilars could be priced initially 25% lower than brand name products and 40% lower following years of biosimilars being on the market.

As an example of the types of high costs that could be cut through the eventual use of biosimilars, Neas cited a report from the Congressional Research Service that said CMS spends more on Amgen Inc.’s Epogen (epoetin alfa) than FDA receives in funding in 2009.

“The only way to rein in costs is through the introduction of competition,” the report states. “It is essential that FDA maintain its commitment to funding the biosimilars program and ensures that a workable pathway is created … free from obstacles that would serve only to delay the availability of FDA-approved, safe, effective and lower-cost biosimilar treatments.”

FDA is expecting only two biosimilar applications in the first year it starts accepting them (Also see "Biosimilars, Year One: FDA Estimates 2 Applications, 1,720 Hours Of Work" - Pink Sheet, 28 May, 2012.). The agency continues its work on regulations to implement provisions creating a biosimilar pathway contained in the health care reform law (Also see "Biosimilars: Exclusivity Guidance Possible; Head-To-Head Comparison Studies Sinking In" - Pink Sheet, 28 May, 2012.). The three initial draft guidances were released in February (Also see "FDA’s Biosimilar Guidances Win Praise For High Hurdles, Flexibility" - Pink Sheet, 13 Feb, 2012.).

CNS, Cardiovascular And Metabolism Generics Generate Most Savings

According to the report, drugs to treat central nervous system and cardiovascular conditions generated the majority of savings in 2011 (57%), combining for more than $100 billion in total savings.

“Generic CNS medications have contributed significantly to the yearly increase in savings, growing 10% in 2011 over the prior year,” the report states.

“Generic metabolism drugs also represented a major source of health care savings in 2011, reducing costs by nearly $27 billion. Since 2002, the savings generated by products in the metabolism drug class have grown and astounding 500%.”

The report notes that when combining these three categories, they account for three-fourths of all savings generated by generic drugs in 2011. The biggest brand to come off patent and face generic competition in 2011 was Pfizer Inc.’s lipid-controlling drug Lipitor (atorvastatin).

In general, IMS noted that nearly 80% of the 4 billion prescriptions written in 2011 were dispensed using generics and accounted for 27% of total drug spending.

Generics Help Drive Innovation, Rep. Waxman Says

Rep. Henry Waxman, D-Calif. also spoke at the press conference. He was an architect of legislation in 1984 with Sen. Orrin Hatch, R-Utah, that paved the way for generics to become a key part of the pharmaceutical landscape.

Waxman maintained that generics also have a role as a driver of innovation. “As IMS documented, more new medicines were launched in 2011 than in any other year in the past decade, and that’s despite the strong presence of generic drugs, because the fact of the matter is when we have generic drugs approved, it gives an incentive for the [brand] pharmaceutical companies to produce more new drugs to take [the generics’] place in the pipeline,” Waxman said. “Competition fosters innovation and forces companies to replace their revenues.”

In 2011, FDA approved the most new molecular entities and novel biologics since 2004 (Also see "Innovation Pays: Priority Drugs Drove Novel 2011 Approvals To New Heights" - Pink Sheet, 9 Jan, 2012.).

Waxman also alluded to “pay-for-delay” deals between generic drug and brand manufacturers that keep generics off the market for a period after patent expiration. He has supported legislation to stop the practice, but such legislation is opposed by manufacturers of innovator branded drugs.

Waxman noted that brand manufacturers are “a very powerful force” in lobbying Capitol Hill. “When you look at the billions and billions of dollars they make in profits, they should allow competition when their exclusivity period is up, but they try to figure out ways to keep on extending that.”

The Pharmaceutical Research and Manufacturers of America issued its own reaction to the GPhA report, saying, “Cost savings attributable to generic drugs represents one stage of the prescription drug lifecycle.”

“Such savings are possible because innovator biopharmaceutical research companies … produce medical advances through pioneering scientific work and long-term, expensive investments,” PhRMA’s statement said. “Over time, these innovative new medicines lead to generic copies that patients use at low cost for many years. Without the development of new medicines by innovator companies, there would be neither the new medicines essential to progress against diseases nor generic copies.”